First 1031 Exchange- (from 2018)

1 Reply

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Long Beach.

Purchase price: $680,000
Cash invested: $235,000

Purchased this property with proceeds from a 1031 exchange. Our intent is to hold the property while fixing up units and raising rents. The property is in a great location, so we want to hang on to it for the long term. Instead of doing a 1031 exchange we intend to refinance and pull out equity to purchase our next property.

What made you interested in investing in this type of deal?

Our goal is to continue to roll equity into more and more investment properties. This one was a perfect up-leg for our 1031 exchange.

How did you finance this deal?

We used a conventional residential investment loan and put 35% down.

How did you add value to the deal?

The property is in decent condition however finishes are a bit dated a rents are very low for the area. The property is also unique in that all units are spacious, all have their own laundry room, there are small backyards, and there is an abundance of garage space and parking (which is unique for the area). Our strategy is to rehab the units and do deluxe upgrades so we can charge a premium for rent. Given the amenities and location it seems like units with deluxe upgrades will be easy to rent.

What was the outcome?

So far so good. The property consists of of a 2bed/1bath unit and (2) 1bed/1bath units. The 2 bed unit was delivered vacant at the close of escrow. The previous tenant was paying $1450 and we were able to rent it for $2245 after doing a deluxe rehab.

Lessons learned? Challenges?

In the 2 bed unit we had to decide between refinishing the wood floors or putting down vinyl click flooring. The cost for the two options was about the same (I expected refinishing the wood to be much cheaper). We decided to go with the vinyl click because it is extremely durable and waterproof. Also, if the unit goes vacant we won't have to worry about refinishing the floor again.

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